Swiggy's food delivery business turned profitable in the March quarter of FY23 (Q4 FY23) after considering corporate costs and excluding employee stock options (ESOP), said its CEO in a blog post on Thursday.
Sriharsha Majety wrote about Swiggy's finances days after two US investors marked down their valuation of the company. A fund managed by asset management firm Baron Capital Group slashed the Swiggy’s valuation by 34 per cent to $7.1 billion as of December 2022, according to filings with USA's Securities and Exchange Commission (SEC). Invesco, which led Swiggy’s previous funding round, marked down the valuation by 33 per cent from $8.2 billion to about $5.5 billion, according to a filing.
Swiggy’s information about its financial performance comes a day before its chief rival Zomato announces its Q4FY23 and full-year performance.
“As of March 2023, Swiggy’s food delivery business has turned profitable (After factoring in all corporate costs; excluding employee stock option costs),” said Majety, a co-founder of the company. “This is a milestone for food delivery globally, not just for us, as Swiggy has become one of the very few global food delivery platforms to achieve profitability in less than 9 years since its inception.”
Majety said that the firm reached the milestone while bringing benefits to its delivery partners and customers. “Our core value that the customer comes first has consistently been reciprocated with deep consumer love and industry-best NPS scores, repeat and retention rates,” said Majety. “We continue to make strides in gaining customer favour, including strong traction in Tier 2 and 3 markets.”
He said his teams "are more in sync than ever" with restaurants to improve their experience with Swiggy. As a result, Swiggy’s restaurant NPS (net promotor score) has improved by over 100 per cent in the past 8 quarters.
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Swiggy's monthly cash burn has reportedly come down to $20 million from about $45-50 million that it was losing each month during its peak in 2021.
“We strongly believe it’s still very early days in India’s journey of eating out and food delivery, and are very sanguine about the growth potential over the next 2 decades,” said Majety. “We will continue to make responsible and measured interventions to fuel further growth in food delivery. There are many underserved geographic and consumer segments and our goal remains to outpace industry growth by continuously investing in the right levers.”
Majety said Swiggy’s investments in Instamart, the instant delivery service, are paying off. “The peak of our investments is behind us and today, Instamart is one of the leading players in the quick commerce space globally. In addition, we’ve also made strong progress on the profitability of the business and we’re on track to hit contribution neutrality for this 3-year-old business in the next few weeks.”
“From pioneering the use of a dedicated fleet in food delivery to creating the Indian quick commerce category through the early pilot of Instamart in 2019, our builders’ bias has not only created the right operating models for businesses but also saved us hundreds of millions in acquisition costs and the resulting dilution in equity,” said Majety.
Swiggy food delivery turning profitable also comes at a time when the Bengaluru-based on-demand delivery platform has undergone retrenchments since the start of this year as it prepares for a public listing. These came in the form of layoffs, shutting down some of the company’s business verticals, as well as additions to its Board of Directors.
In January this year, the firm laid off 380 employees from its 6,000-strong workforce, which Majety attributed to “over-hiring”. Swiggy has also, during the same time, shut down its meat delivery vertical as it failed to achieve a proper “product market fit”.
Not two weeks after the layoffs, the company made several additions to its Board by appointing Sahil Barua, managing director and CEO of Delhivery, Mallika Srinivasan, managing director of TAFE, and Shailesh Haribhakti, chairman of Shailesh Haribhakti & Associates, as independent directors.
Aside from its meat delivery vertical, Swiggy has also shut down its premium grocery delivery business- Handpicked. In March this year, the firm also sold its cloud kitchen business, Swiggy Access, to Kitchens@ in a share-swap deal, through which it rented out kitchen spaces to restaurants.
Since then, the food aggregator has also introduced a Rs 2 platform fee for all its users. Through this modest charge, Swiggy – who delivers more than 1.5 million orders per day, stands to accumulate a sizable amount, which it will redirect to its core business.
Swiggy, in its results for the financial year 2022, reported that its losses widened 2.24 times to Rs 3,628.9 crore, from Rs 1,616.9 crore in FY21, fuelled by a 227 per cent rise in costs.
Expenses came in at Rs 9,748.7 crore in FY22, compared to Rs 4,292.8 crore the year before. Despite this, Swiggy reported revenue of Rs 5,704.9 crore, a little over two-fold jump from the previous financial year.
According to analysts at HSBC, Swiggy’s cash burn in FY22 stood at Rs 3,900 crore compared to its rival Zomato, which burnt Rs 700 crore during the same period.
Zomato has gained around 13 per cent in terms of the food delivery market share since FY22 to reach a settled duopoly. As of the fourth quarter of FY23, the Gurugram-based firm is now the top dog in the market with a 56 per cent market share, versus Swiggy’s 44 per cent, on the back of its new Zomato Gold loyalty program, HSBC said in an earlier note.
Despite having its losses widen to Rs 346.6 crore for the quarter that ended in December (FY23), compared with Rs 63.2 crore in year ago period, executives at the firm were confident it would reach adjusted earnings before interest, tax, depreciation, and amortisation (Ebitda) break-even (excluding quick commerce) by Q2 of 2023-24.
Meanwhile, Zomato’s revenue in Q3 surged 75 per cent to Rs 1,948.2 crore, compared with Rs 1,112 crore in the same period the previous financial year.
The slackening was chalked up to a macro slowdown in the food delivery market, coupled with a boom in dining out and surge in travel at the premium end.
The firm is, however, like Swiggy, “optimising investments across the board, including taking a hard look at resource allocation across functions, shutting down non-performing markets, and reassessing our headcount, among others,” CEO Deepinder Goyal had said.